Why Volume is Important? Volume is used by technical analysts to confirm trends and chart patterns. The strength of any given price movement is measured primarily by the volume. In fact, a 50% rise in a stock price may not be all that relevant at all if it occurs on very little volume – just look at penny stocks.
[ Volume is extremely important as a confirmation for technical indicators, but you'll still need to know about other technical indicators. Investopedia's Technical Analysis Course provides a comprehensive introduction to the subject with over five hours of on-demand video, exercises, and interactive content covering both basic and advanced techniques. ]
For example, suppose that a stock jumps 5% in one trading day after being in a long-term downtrend. Is this a reversal of the long-term trend? The answer depends on whether there was a substantial amount of volume behind the move. If the volume was below average, the move was likely a fluke and the downtrend is likely to continue. On the other hand, if the volume was significantly higher than average, then it could be the start of a reversal. (To read more, check out Trading Volume – Crowd Psychology).
In addition to single day moves, the trend in volume over time can be related to price trends to determine if a stock is gaining or losing momentum. An example might be a stock that has been trending higher with declining volume, which suggests that the rally may be losing momentum. In that case, traders may want to be on the lookout for a reversal and perhaps reduce or sell their long positions in preparation. This is known as divergence. (For additional insight, read Divergences, Momentum, and Rate of Change).
News 
Market Data 
Discover 
